Question

The Treasury bill rate is 3.5%, and the expected return on the market portfolio is 10.4%. Use the capital asset pricing model. a. What is the risk premium on the market?

Answer 1

6.9%

Step-by-step explanation:

Treasury bill rate is 3.5%

Market portfolio is 10.4%

Therefore the risk premium on the market can be calculated as follows

= 10.4%-3.5%

= 6.9%

Hence the risk premium is 6.9%